U.S. stock futures are mixed heading into the open this morning. The Federal Reserve’s expected deferral to December on interest rates provided ballast for the major market indices … save the Nasdaq, where Facebook Inc’s (NASDAQ:FB) 5% premarket plunge is creating significant drag.
As a result, Dow Jones Industrial Average futures are up 0.2% and S&P 500 futures have added 0.2% as well, while Nasdaq-100 futures are about even.
Wednesday’s options activity remained elevated following the Federal Reserve’s continued indecision on interest rates, with about 14.8 million calls and 15.8 million puts changing hands on the session. Puts gained a considerable advantage over on the CBOE, where the single-session equity put/call volume ratio leaped to another five-month high of 0.99. The 10-day moving average was thrust to a four-month high of 0.70.
Earnings action was once again a significant driver for Wednesday’s options activity. Facebook saw call volume drop below its daily average ahead of last night’s quarterly report, while Alibaba Group Holding Ltd (NYSE:BABA) saw mixed activity following its earnings announcement as focus shifted to the SEC’s accounting probe. Finally, Gilead Sciences, Inc. (NASDAQ:GILD) options traders attempted to remain positive in the wake of the company’s third-quarter earnings miss.
Facebook Inc (FB)
Another blowout quarter from Facebook was ruined during the company’s earnings conference call last night. Facebook saw earnings soar to $109 per share, blowing past expectations for 97 cents per share, while revenue spiked 56% to $7.01 billion. Wall Street was looking for revenue of $6.92 billion.
FB stock was trending higher immediately following the results, but CFO David Wehner said in last night’s earnings call that “We expect to see ad revenue growth rates come down meaningfully.”
That statement alone sent FB stock plunging more than 7% in after-hours trading. Losses have mitigated this morning, but FB was still down more than 5% at last check.
Options traders expressed a modicum of caution ahead of Facebook’s quarterly report. Total volume arrived at 1.3 million contracts, with calls snapping up about 61% of the day’s take — down from their typical range of 64%-65%. Should FB’s losses carry over into the open, the stock would be trading at its lowest point since late July, with FB hovering just above heavy weekly Nov 4 put open interest of 13,250 contracts at $120 and peak put OI of 14,585 contracts at $119.
Look for FB to hold at support near $120, unless the brokerage community begins to pile on with downgrades or target revisions.
Alibaba Group Holding Ltd (BABA)
BABA stock slipped 2.6% on Wednesday in a sell-on-the-news event after Alibaba Group reported strong second-quarter results. Earnings rose 46% to 79 cents per share on revenue that was up 56% at $5.1 billion. Both figures bested the Street’s expectations. Additionally, Alibaba saw mobile monthly active users jump 30% year-over-year to 450 million.
But the earnings beat appears to have been expected, and attention has shifted back to the SEC’s investigation into Alibaba’s accounting practices.
Options traders were divided on BABA stock yesterday. Total volume rose to nearly 600,000 contracts, with calls eking out a win with 53% of the day’s take. The shares breached key technical support at $100, and are now trading well below most major call accumulations among November options.
Put support could emerge just below BABA stock, however, as some 4,300 puts are open at the $97 strike in the Nov 18 series. The next potential backstop is the $95 strike, where more than 12,400 puts are open in November.
Gilead Sciences, Inc. (GILD)
Gilead offered up a mixed report on Tuesday. The pharmaceutical giant said it earned $2.75 per share on revenue of $7.5 billion, versus expectations for $2.81 per share on revenue of $7.46 billion. Gilead reiterated its full-year outlook of $29.5 billion to $30.5 billion in revenue. Analysts are looking for revenue of $30.37 billion.
GILD stock fell more than 2% following the report, driving the shares down to test multiyear lows in the $72.50 region. The pullback appeared to bring out bargain hunters, however — at least in the options pits. Total volume swelled to 167,000 contracts, with calls making up 61% of the day’s take.
Looking out to Nov. 18 options, interest is growing at the $72.50 strike, where 3,500 calls and 6,370 puts are currently open.
However, the $75 strike has seen the most activity, with call OI rising to 9,400 contracts and put OI totaling more than 13,400 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
